Fiscal Policy and Economic Backdrop
Summer 2020

The summer statement on July 8, from Chancellor Rishi Sunak, promised more government incentives aimed at supporting businesses and jobs. Many prospective buyers will make an instant saving thanks to the abolition of stamp duty taxation on the first £500,000 of a property purchase. An investor buyer will continue to pay the 3% surcharge but will save up to £15,000.

The Treasury has also announced that buyers of additional homes on or after 1 January 2017 who have been prevented by “exceptional circumstances” from selling, may still be eligible for a refund on their 3% surcharge. To date £1.1 billion of additional tax has been refunded since the start of 2017.

There is no denying the shock to the economy of the COVID-19 pandemic. The UK economy contracted by 20.4% in April, rebounding by just 1.8% in May, and the fall across 2020 will undoubtedly be of record levels. Outlooks for 2021 are caveated on whether economists predict a V, U, L or even W-shaped recovery curve. Activity levels across the UK’s construction, manufacturing and service industries improved in June according to the results of the latest IHS/Market sentiment surveys with UK consumer confidence, as measured by the GfK, rising 9 points in July, as lockdown restrictions eased. Inflation, 0.6% in June, is significantly below the government’s 2% target and there is little expectation of any change in the base rate of interest, currently just 0.1%, in the foreseeable future.